Ichimoku Charting - Brainy's Share Market Toolbox · Advanced Interpretation Wider or steeper the...
Transcript of Ichimoku Charting - Brainy's Share Market Toolbox · Advanced Interpretation Wider or steeper the...
Goals
Benefits / Limitations of Ichimoku charting
Chart construction
Chart interpretation
Advanced uses
Practise with your favourite markets
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Independent Trader for 15 years
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Ichimoku Benefits
Very simple to interpret (once you know how!)
Keeps you on the right side of the market
Leading indicator
Support & Resistance zones
Overbought / Oversold conditions
Multiple timeframe confirmations
Excellent secondary indicator
Generally works well on weekly charts
Ichimoku Limitations
It’s not a trading system
Works best in trending markets
“Signals” can often be late
Can become noisy at lower timeframes
Detailed Calculation
Tenkan-sen (Conversion Line): (9-period high + 9-period low)/2)) The default setting is
9 periods and can be adjusted. On a daily chart, this line is the mid point of the 9 day
high-low range, which is almost two weeks.
Kijun-sen (Base Line): (26-period high + 26-period low)/2)) The default setting is 26
periods and can be adjusted. On a daily chart, this line is the mid point of the 26 day
high-low range, which is almost one month).
Senkou Span A (Leading Span A): (Conversion Line + Base Line)/2)) This is the
midpoint between the Conversion Line and the Base Line. The Leading Span A forms
one of the two Cloud boundaries. It is referred to as "Leading" because it is plotted 26
periods in the future and forms the faster Cloud boundary.
Senkou Span B (Leading Span B): (52-period high + 52-period low)/2)) On the daily
chart, this line is the mid point of the 52 day high-low range, which is a little less than 3
months. The default calculation setting is 52 periods, but can be adjusted. This value is
plotted 26 periods in the future and forms the slower Cloud boundary.
Chikou Span (Lagging Span): Close plotted 26 periods in the past. The default setting
is 26 periods, but can be adjusted.
Basic Interpretation
Stick to Weekly timeframe
Price and Lagging Line above cloud is Bullish
Price and Lagging Line below cloud is Bearish
Cloud projects future areas of support and resistance
Advanced Interpretation
Wider or steeper the cloud the greater the support & resistance
Crosses tend to happen when cloud turns thin and/or horizontal
Relative distance of price and Lagging Line from cloud can
determine extremes. Cloud tends to act as a magnet for price.
Base and Conversion line crosses can be used similar to MA crosses
Use multiple timeframes for confirmation
Further Reading
Stockcharts.com Chart School on Ichimoku
Cloud Charts: Trading Success with the Ichimoku Techique by David
Linton
Final Thoughts
Great for gauging sentiment in the market you are interested in
Use primarily as a secondary indicator
Use other tools to refine entries and exits
Ichimoku can lower emotion by keeping you on the right side of the
market
Can be used to filter a short list of opportunities
A great addition to your technical analysis toolbox
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